GAO Report Requested by Durbin, Members Highlights Need for Better Oversight of For-Profit Colleges

Approximately one-third of for-profit to nonprofit college conversions involve insiders

WASHINGTON – U.S. Senators Dick Durbin (D-IL), Maggie Hassan (D-NH), Patty Murray (D-WA), and U.S. Representative Bobby Scott (D-VA-03) announced today the release of a Government Accountability Office report that they requested into for-profit college conversions – the process used by some for-profit colleges to become nonprofit, changing both their tax filing status and level of higher education accountability requirements applied to the institution. 

You can read the report here.

The report highlights significant concerns with insider involvement in for-profit conversions, including that:

·         Approximately one of three for-profit college conversions involved insiders

·         Insider conversions account for the vast majority of federal student aid

·         Insider conversions have worse financial performance

·         Many of the insider conversion institutions engage in deceptive marketing practices

The Government Accountability Office recommended that the Internal Revenue Service strengthen its process for reviewing for-profit conversion applications. It also recommended that the Department of Education provide better oversight after a conversion occurs, which ispart of Senator Hassan and Durbin’s PROTECT Students Act.

“This report confirms what we have long known: that for-profit colleges are gaming the system and our federal government is not adequately protecting students and taxpayers. I stand ready to work with the Biden Administration to address the shortcomings identified in this report and enact new measures like the PROTECT Students Act,” said Durbin.

“The GAO report sounds the alarm on suspect and shady for-profit college conversions—a trend that The Century Foundation has been raising concerns about for years. Most notably, the comprehensive study reveals that when insiders are involved in the deal, it greatly increases the risk that the new nonprofit school will divert resources away from the college’s educational mission, to the detriment of students, and toward the former owner’s bank account. Second, neither the IRS nor the Department of Education is doing enough to address this growing problem. These findings should spark action: We need greater oversight to ensure that de-facto for-profit schools and their owners don’t get away with misleading students and dodging regulations,” said Robert Shireman, director of higher education excellence and senior fellow at The Century Foundation.